Averting bankruptcies among the software development houses in Lahore, Pakistan

Khalid Mumtaz Khan; Zahid Mahmood

doi:10.47264/idea.jhsms/5.2.4

Authors

Khalid Mumtaz Khan Department of Business Studies, Bahria Business School, Bahria University, Islamabad, Pakistan.
Zahid Mahmood Department of Management, College of Business Administration, King Saud University, Saudi Arabia. https://orcid.org/0000-0003-4263-1946

DOI:

https://doi.org/10.47264/idea.jhsms/5.2.4

Keywords:

Information technology, Information and communication technology, Software development, Activity based costing, Competitive pricing, Software industry

Abstract

With the first software development house established in 1977, Pakistan, the 4th largest technological market globally, is home to over 2000 registered software development houses. However, the industry has its challenges, and hundreds of these houses close yearly owing to insolvency, and even more crop up. To understand these houses' financial difficulties, a sample of 20 small-size and 20 medium-sized software houses has been taken from the hundreds in Arfa Software Technology Park in Lahore, Pakistan. Financial Blueprints of 2 projects per house per year for five years, i.e., 2018-2022, have been obtained. These case studies have been contrasted with those written and published in the developed world. It was found that there needs to be more costing and pricing mechanisms for software-related projects. This results in under/over-costing the cost and pricing of the projects, which is a leading cause of financial bankruptcy for most software houses. Activity-based costing, as the costing technique, and competitive pricing, as the pricing mechanism, may be adopted as the best practice in the software development industry. These solutions could significantly reduce the risk of financial bankruptcy among software houses, potentially transforming the industry's financial landscape.

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